Redundancy survival guide

Being made redundant can be a difficult time in your life. Here are some things you can do to sort out your money when you are made redundant.

What is a redundancy package?

A redundancy package includes any of the following:

  • A redundancy or severance payment
  • A 'golden handshake' or other incentive payment
  • A payment in lieu of notice
  • Unused annual leave and long service leave

Accrued sick leave or personal leave is not usually paid out to you when you leave an organisation.

People who are owed employee entitlements after losing their job because their employer has gone into administration or liquidation may be able to get financial help from the Australian Government. Find out more about the Fair Entitlement Guarantee.

How will you be taxed?

A genuine redundancy, which consists of a payment in lieu of notice and a possible incentive payment, has a special tax treatment which allows some or all of your payment to be paid to you tax free.

The tax free portion is usually:

base amount + (service amount x completed years of service)

For the 2016/2017 financial year the base amount is $9,936 and service amount is $4,969. Any amounts over the tax-free portion are taxed concessionally at a maximum of 32% (including Medicare levy) if you are below preservation age, or 17% (including Medicare levy) if you have reached preservation age.

Amounts over the tax-free portion are taxed as employer termination payments (ETPs). If you are aged 65 or over you are not eligible for a 'genuine redundancy' payment and your entire payout will be treated as an

Unused annual leave and long service leave is also taxed concessionally, up to 32% (including Medicare levy). For more information see the Australian Tax Office's redundancy payments webpage.

Making a redundancy plan

Prepare an emergency budget

It's easy to spend your payout but it pays to be cautious. Unless you are retiring, your payout will have to last you until you get another job, and this may take longer than you think.

Smart tip

Work out how long your payout will last so you can better plan your next steps.

The first thing to do is to list all your essential expenses and add them up. These are costs such as rent or mortgage payments, utilities, food, transport costs, insurances and other items that are necessary expenses. Create a temporary budget, just to get you through this period of time.

Work out where your money is going.

Budget planner

Once you have your budget sorted you can see how long your payout can last before you get another job.

If you have received a large payout, think about:

  • Putting the bulk of it into a high interest savings account
  • Using it to make extra payments on your mortgage (if you have a redraw facility)

Then you can draw the money down slowly to cover your ongoing expenses. If you choose to pay down debts faster than required, you may be unable to access unemployment benefits before any waiting periods end, even if you are experiencing financial hardship.

Paying your bills

Trying to manage bills without a regular income can be stressful.

If you are struggling to pay your loans and credit cards you can apply for a hardship variation from your credit provider.

If you are having trouble paying your water, phone, gas or electricity bills, contact your utility providers and see if you can negotiate a better repayment arrangement. See dealing with utility bills for more details.

Here are some other webpages that can help you:

Don't forget your super

While you are not working don't forget about your super. Check how much you have in your super fund and think about the effect a break from work may have on your super balance.

Work out how taking a break from paid work will affect your retirement income.

Retirement planner

Unemployment benefits

Waiting periods

When you have been made redundant your payout will be based on a number of weeks or months of your ordinary time earnings. You will also have received an amount of money for your unused annual leave. You will not be eligible for Centrelink benefits for the period of time you have been paid for.

For example, if you receive a payout equal to 8 weeks pay plus 3 weeks for unused annual leave, you will not be eligible for Centrelink payments for at least 11 weeks. This is known as an 'income
maintenance period'.

You may also have a 'liquid assets waiting period' based on the assets you have that could be used as income.

If you are experiencing financial hardship due to unavoidable or reasonable expenditure, these waiting periods may be waived. You should contact the Department of Human Services to lodge a claim for payment. They will be able to assess your claim and advise you of any waiting periods that could apply.

Your partner's income

If you have a partner, your partner's income will be taken into account when working out your entitlement to income support payments.

If your partner has a high income you may not be eligible for income support benefits. For more information see Department of Human Service's income test for allowances.


Being made redundant may give you an opportunity to complete a short course or pursue a new qualification. This may help you get a new job.

If you are entitled to Centrelink benefits you may be able to get help with the cost of retraining. See the redundancy webpage on the Department of Human Services website

Returning to work

Finding a new job will be a relief for many people who have gone through a redundancy. What you do next with your money will depend on the state of your finances when you start your new job.

First sort your bills

If the bills have mounted up while you were unemployed, your first priority will be getting back on your feet. Start with the most urgent bills, making sure you leave yourself enough money to cover ongoing living expenses. Be disciplined with your cash until you have caught up with all your bills.

Money left over

If you are fortunate enough to still have some of your payout left when you start a new job, think carefully about the opportunities this gives you.

Here are a few ideas about what you could do with the left over money:

  • Reduce debt - If you have any debt such as credit cards or loans, consider paying off all or some of this debt to free up income for savings.
  • Create an emergency savings account - This can help you deal with unexpected events in the future. See our webpage on building an emergency fund for tips on how to create a savings buffer.
  • Start an investment portfolio - Buy some shares or start a managed fund that you can regularly contribute to and build your investment plan
  • Take a break - Being out of work and searching for jobs can be extremely stressful, so if you can afford it, take a short break before you start your new job to recharge your batteries

Being made redundant can be an emotional and difficult time. It's important to keep a level head and plan as much as possible so that you make the best of what you have. Try to keep a positive attitude as this will show through in job interviews and seek help if you need it.

Related links

Last updated: 19 Jul 2017